The Tampa Bay economy grew over the past twelve months adding 30,800 jobs resulting in an annual growth rate of 2.2%. This rate is similar to the US economy as a whole which grew at a 2.1% annualized rate in the fourth quarter. The highest annual growth rates in Tampa Bay were once again in the financial activities sector which added 1,600 jobs (up 1.3%) and the professional and business services sector which added 6,500 jobs with an annual increase of 2.6 % over the last 12 months. The unemployment rate in Hillsborough County fell by forty basis points over the last 12 months to 2.7% while Pinellas County’s unemployment rate also fell 40 basis points to 2.6% during that same period. By comparison, the US overall employment rate remained stable in the fourth quarter at 3.5%.
The prospects for the Tampa Bay area office market remain bright due largely to steady business expansion, strong in-migration, employment growth, and solid consumer confidence. The pace of job growth in the Tampa Bay region continues to outpace both the state of Florida and the nation as a whole.
Office Market Overview – Hillsborough County
Overall rents (including all classes and direct and sublet space) increased in the fourth quarter by 5.6% to $27.54 per square foot full service over the last twelve months. Class A rents closed out the fourth quarter up 6.4% to $31.47 a foot over the last 12 months. Class A rents in Downtown Tampa and in Westshore increased over the last twelve months by 4.7% to $33.77 a foot in Downtown Tampa and by 10.6% to 36.87 a foot in Westshore. Trophy assets in Westshore and Downtown Tampa are asking rents of $40 plus per square foot which are the highest asking rents ever recorded in Downtown Tampa and Westshore. The overall vacancy rate for office space in Hillsborough County increased by 190 basis points from the same time last year to 13.8% in the fourth quarter. This increase was due in large part to large direct and sublease spaces becoming available in the I-75 submarket.
At the close of the fourth quarter, Tampa/Hillsborough County had approximately 1.3 million square feet under construction. This is the most office space under construction since 2008 and has been driven by high tenant demand.
Significant projects include:
- Heights Union – 300,000 feet of office space under construction in two 150,000 square foot office buildings together with a mixed-use development. Both buildings are expected to be completed by mid-2020.
- Water Street – 1001 Water Street is a 405,000 square foot office tower located in Water Street, a multi-billion dollar mixed-use project being developed by Jeff Vinik and Bill Gates’ Strategic Property Partners. 1001 Water Street is the second office building under construction in the project which includes the 150,000-foot office tower under construction in the mixed-use development called Sparkman Wharf.
- Midtown One – Phase I is to be completed before the 2021 Super Bowl and includes retail, a hotel, multi-family, apartments, parking garages, and a 151,845-foot speculative office tower.
- At Tampa International Airport construction has begun on Sky Center One a 270,000-foot office building. Approximately half of this building is expected to be leased by the airport.
Office Market Overview – Pinellas County
Fourth-quarter overall rents increased by 4.8% in the last 12 months to $23.20. Asking rates for Class B assets increased 3.4% year over year to 20.64. Class A rates in downtown St Petersburg rose 6.5% year over year to $31.99 per square foot. Rates in the Gateway submarket rose 8% from the same time last year to $20.53 per square foot. The overall vacancy rate for office space in the county fell 230 basis points year over year to 9.6% which is the lowest vacancy level in over 20 years. In downtown St Petersburg the vacancy rate fell 520 basis points year over year to 6.5%. This is a record low vacancy.
While St Petersburg does not currently have any new office property under construction, there are several new projects in the pipeline:
- Red Apple Group is moving forward on a planned 45-story, 300- unit luxury condo tower with a 225 room hotel and 20,000 SF of office space on a 2.3-acre site in the 400 block of Central Avenue in downtown St. Petersburg. Work is scheduled to begin in the spring of 2020.
- The DeNunzio Group plans to build a mixed-use development at 450 First Avenue North. This project will contain a total of 40,000 feet of class A office space.
- Edge Central Development Partners has been selected by the City to redevelop the old St Petersburg Police headquarters at the corner of 13th Street and Central Avenue. This will be a mixed-use development with at least 100,000 feet of much needed Class A office space.
- Universal Insurance Group plans to construct a 150,000 square foot office headquarters at 800 First Avenue South. This project will not provide any new market office space as Universal will occupy the entire building.
- The City of St. Petersburg is in discussions with five developers regarding the redevelopment of the municipal services center at the corner of 4th Street and Central Avenue. Most of the proposals involve mixed-use developments with a significant amount of office space.